Frankfurt, Germany — The European Central Bank (ECB) said Thursday it sanctions Crédit Mutuel for not following ECB rules on internal models, fined €3.54 million.
“Between May 2021 and April 2022, when using its internal models to determine its risk-weighted assets, the bank did not apply floors set by the ECB for calculating credit risk for certain exposures”, the ECB argued. “This constitutes serious negligence as said floors were clearly stipulated in the relevant ECB decisions and the bank omitted to take obvious actions to avoid the breaches. It also prevented the ECB from having a comprehensive view of the bank’s risk profile.”
The ECB said it set these floors to compensate for the underestimation of risk-weighted assets resulting from deficiencies in the bank’s internal models that it needed to fix.
“However, in April 2022, the ECB granted Crédit Mutuel permission to revert to a less sophisticated approach (the foundation internal ratings-based approach) for calculating credit risk for these exact exposures. As a result, at present the bank no longer uses those internal models for the exposures and is therefore no longer required to implement these floors”, the ECB said.
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